A short comment on Reichenbach’s Principle of Common Cause

ReichenbachWhen I came across this principle in Mark Alford’s tutorial paper on Bell Inequality I was intrigued:

Reichenbach’s principle of common cause [1]: correlations can be explained in terms of causes. if two phenomena show a correlation, either one causes the other or they have a common cause.

This may be a valid principle in special physical settings but it cannot (should not) be generalized to all physical settings. And clearly, in the complex world of financial instruments the principle mentioned above can easily be falsified. In the world of financial instruments there are correlations without common cause. As an example, I would like to remind you that 2 random processes will exhibit non-zero correlation during certain periods. It is true that the correlation between two stochastic (random) time-series would be zero if we considered infinite time duration. But, in reality, we consider finite durations. Non-zero correlations will happen even if the two processes are stochastic (totally random) if the measurement duration is finite. In the discussions of Bell Inequality of Quantum Mechanics this fact should be considered. I have not seen an explicit discussion on this point anywhere. Maybe I should write something about it.

Historical note

Hans Reichenbach immigrated to Turkey escaping from Nazi persecution in Germany and taught at Istanbul University between 1933 and 1938 prior to his immigration to United States.

SEP article on Hans Reichenbach

http://plato.stanford.edu/entries/reichenbach/

References

[1] H. Reichenbach, “The Direction of Time”. Berkeley: University of Los Angeles Press, 1956

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About Suresh Emre

I have worked as a physicist at the Fermi National Accelerator Laboratory and the Superconducting Super Collider Laboratory. I am a volunteer for the Renaissance Universal movement. My main goal is to inspire the reader to engage in Self-discovery and expansion of consciousness.
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